News

All That Is Needed Is a Spark

The Stock Trader’s Almanac’s January Barometer is about to make it’s annual appearance as we wrap up trading today’ In a nutshell, the direction of the S&P 500 index in January sets the tone for prices throughout the year, though “counter” moves are frequent.

So far, the S&P500 is ahead 4.4%, which ranks right up there with past Januarys that were followed by boomers. Since 1960, there have been 7 January’s that posted 4% moves. In neither case was the market down for the year, in fact in all cases, the S&P 500 closed 20% higher on average The Almanac boasts only six significant errors in 60 years.

Investors are understandably wary as the week unfolds. It is a week loaded with economic indicators, which are hoped will confirm the U.S. economic recovery is on track. Unless Greece comes up with another roadblock. The direction of least resistance is “UP”.

A headline today indicated home prices in the US.have stabilized and in fact are declining at a slower rate. This conclusion is drawn from a 10 o’clock Case-Shiller report will show property values in 20 cities in Money, posted the smallest decline in 10 months.

Absence of a contribution from the housing sector has obviously reduced the thrust of our current economic recovery. People need a place to live, especially one in a good neighborhood and school district. When it becomes apparent that whose houses are being priced up, you’ll comparables pick up as well. (See:Dec 19, “BIG Week : Economic Reports – Watch Housing.”At some point (extremes), this becomes a common sense issue.

Granted unemployment is still high and mortgages difficult to, but rentals are nearly as costly asa buying a home BUT, buyers are picking up houses at a historic discount and financing is cheap. What’s more, a home is so basic to one’s life

This week has the potential to rattle a lot of cages. Like two drunks swinging wildly outside a bar trying to connect with a solution to Europe’s dilemmas. While solutions seem light years apart, I don’t buy that. Cover your back, BUT PREPARE FOR OPPORTUNITY.

TODAY:

Look for 100 down in the DJIA at the open with a potential for 12,439 this week.

This may be the week that counters that bleak prospect of confirms it.

We get 16 economic reports, some obviously more important than others, but combined stand to paint a positive picture from one that appears to be weakening.

Generally, I don’t like to dwell on economics, but it is a swing factor in uncertain times like this, but this week could be big.

Monday

Personal Income and Outlays (8:30 a.m.): Grew at a slower rate in Nov. vs. Sept.

The European Union(EU) is an economic and political union of 27 sovereign member states with origins going back to 1958, but which was officially established by the Maastricht Treaty in 1993. Its goals are a free movement of goods, services, capital and people differing in life style, language, economies, geography, religion, politics and history.

Important components of the EU include: European Parliament, European Commission, Council of European Union, European Council Court of Justice and European Union, and the European Central Bank.

The euro area (eurozone) is an economic and monetary union, EMU, of 17 member nations that use the “euro” as their common currency and sole legal tender. Its members include: Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia, and Spain.

While the goal of single currency originated with the European Economic Community, EEC, in 1969, it was not until 1993 that members were legally bound to start the monetary union no later than January 1, 1999. At that point, the euro was launched after which it was an “accounting” currency until January 1, 2002 when euro notes and coins were issued and national currencies phased out in the eurozone.

The European Central Bank (ECB) is the central bank for the eurozone. Governed by its president, Mario Draghi, and a board of the heads of national central banks, the ECB’s primary responsibility is to maintain the euro’s purchasing power and price stability within the eurozone.

The Eurosystem is the monetary authority of the eurozone comprised of the ECB and the central banks of its member states, which are charged with applying the ECB’s policy.

The European Commission, comprised of one commissioner from each of the 27 member states, represents the interests of the EU, drafts proposals for laws, and manages the day-to-day business and disbursement of funds.

European Banking Authority (EBA): Established on Jan. 1, 2011 as a regularity agency to conduct stress tests of banks in order to detect weaknesses in capital structure. It has the power to overrule national regulators if necessary to prevent unfair competitive advantages between jurisdictions. It issues a report, Common Reporting Framework (COREP) covering capital requirements regarding credit risk, market risk, operational risk, fund and capital adequacy ratios.

The European Financial Stability Facility (EFSF): created by eurozone members to safeguard financial stability in Europe. Authority includes loans to countries in need, intervention in primary and secondary markets pursuant to ECB analysis, finance recapitalizations of financial institutions. It is backed by guarantee from the eurozone members for a total of 780 billion euros and has a lending capacity of 440 billion euros. (not considered adequate)

The writer of Investor’s first read, George Brooks, is not registered as an investment advisor. Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. Readers are expected to assume full responsibility for conducting their own research pursuant to investment decisions in keeping with their tolerance for risk.

DISCLOSURE:
The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer